EMPLOYMENT & SMALL BUSINESS - MORPC
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EMPLOYMENT & SMALL BUSINESS Summary Central Ohio experienced growth in employment that rivaled the national average in the years following the Great Recession. Strong growth overall, however, was not evenly felt across the region. Wages for employment, for instance, diverge widely across industry sectors, which meant that for some, the expense of working was not sufficiently offset by the earnings. This was especially challenging for working parents, with the high cost of childcare added to already distressed budgets. Overall, Central Ohioans were recovering their personal finances, which translated as more spending and contributions to the economic engines that drive employment growth. Small businesses, however, were struggling to compete with large national or global chains and a growing e-commerce market. Key Issues The COVID-19 pandemic initiated a historic economic collapse, including a rapid 14% employment decline in a single month. A recovery is in progress but is only partial. The industry sectors hit hardest by the pandemic shutdowns were primarily those with the lowest average wages. This created financial peril for un- and underemployed Central Ohioans, especially those with already low earnings. At the nexus of small business and supports for workers, the pandemic impact on childcare centers has the potential to create greater workforce challenges as childcare access and affordability are compromised. The COVID-19 shutdowns prompted a jarring collapse in consumer confidence. This, paired with reduced consumer spending, has implications on overall growth of the economy. Decreased consumer spending and weak confidence across the board created threats to an already weak small business environment. Small business closures, still a threat, will leave an indelible mark on both the region’s economy and communities. Central Ohio COVID19 Policy Briefs | Employment & Small Business 1
RECOVERY FROM HISTORIC EMPLOYMENT COLLAPSE
Central Ohio employment grew by 23% between December 2009 and February 2020 – totaling 214,400 jobs, nearly
one-third greater than the national average. This above-average growth was driven by key sectors including construction,
finance and insurance, and healthcare.
Employment in the Columbus metro suffered a historic decline during the March and April 2020 lockdown. The
employment collapse brought the region a total loss of 160,300 jobs (14.2%) (Figure 1). Leading this loss was leisure
and hospitality – arts, entertainment, recreation, hotels, restaurants, and other food services. This sector lost nearly
half its employment over that two-month span. In the Columbus MSA, leisure and hospitality accounted for 10% of total
employment in February 2020, but its loss represented more than one-third of the total employment decline (Figure 2).
Although growth in succeeding months has been significant, employment as of January 2021 remained 47,000 (4.2%)
below its February 2020 peak. While Central Ohio jobs have recovered faster than the country as a whole – U.S.
employment in January 2021 remained 6.5% below February 2020 – it will still be many months before job totals return
to their pre-pandemic levels.
Figure 1. Total Employment Figure 2. Employment Gain, Loss, & Net Change
Columbus MSA & US Columbus MSA & US
2010-2020, Monthly Apr 2020-Jan 2021, Comparison
Nationally, no primary sector has recovered all of the jobs lost last March and April. Locally, the Regionomics®
seasonally adjusted employment estimates show three sectors above their year-ago levels: construction, manufacturing,
and transportation and utilities. January financial activities employment is equal to its February 2020 level. However,
employment in the leisure and hospitality sector remains 26,000 (23%) lower than before the pandemic – a net loss
comparable to the national average.
The Regionomics 2021 Columbus Economic Forecast predicts a year-over-year gain of 26,800 jobs (2.6%). That would
be the largest gain since 2012, but it will leave December 2021 employment well below its February 2020 peak. This is
consistent with national forecasts. The quarterly surveys of economists by the Federal Reserve Bank of Philadelphia and
the National Association for Business Economics (NABE) both expect strengthening U.S. employment growth over the
year, but neither panel expects a full employment recovery this year. Among the economists in the NABE survey, 65% do
not expect this to occur until 2023 or later.
A related concern is the effect of long-term unemployment on workforce readiness and workers themselves. As discussed
in a recent Harvard Business Review article,1 the long-term unemployed lose skills and the contacts who could help them
regain employment, and suffer a range of psychological impacts. While no local statistics measuring unemployment
duration exist, the number of people nationwide unemployed for more than 27 weeks has quadrupled from its year-ago
level to more than 4 million. The share of all unemployed who have been without work for 27 weeks or more is now 41.5%,
more than double the share from before the pandemic. This impact has fallen disproportionally on women: the percentage
of women who are in the labor force is at its lowest level since 1987. Rather than the hoped for "V-shaped" recovery the
disparities in long-term unemployment point to the reality of a "K-shaped" recovery, with many in the region experiencing
more lasting economic struggles.
Some of the job dislocations from the pandemic will be permanent. Two-thirds of the economists in the NABE panel expect
up to 5% of jobs to disappear permanently, while one-quarter expect the impact to be even larger – up to 15%. There will
be a need for significant investment in retraining to address this dislocation and return these workers to the labor force.
Central Ohio COVID19 Policy Briefs | Employment & Small Business 2
FINANCIAL PERIL FOR UN- & UNDEREMPLOYED
Pandemic-related job losses have
Figure 3. Net Employment Change by Industry
disproportionately impacted workers in lower-
(Average Annual Wage)
wage industry sectors, particularly leisure Columbus MSA
and hospitality (the arts, recreation, hotels, Feb 2020-Jan 2021, Comparison
and restaurants), and retail trade. Of the
47,100 net jobs lost through January 2021
in the Columbus MSA, 25,900 are in leisure
and 4,900 are in wholesale and retail. These
sectors account for two-thirds of the total
jobs lost. Wages in leisure and hospitality in
particular are the lowest of any sector – an
average of $21,463 in the Columbus MSA in
2019. Low-wage industry sectors also include
administrative support and waste services
(temporary staffing is included in this sector),
and other services. These are the most “at-
risk industry sectors”, and have suffered a
combined net loss of 34,000, 72% of all jobs
lost (Figure 3).
Low-income workers are more vulnerable
to the impacts of job loss. A 2019 Federal
Reserve study found that nearly 40% of
households nationwide were not equipped to
handle a sudden $400 expense – let alone
sudden unemployment. Housing is a particular
vulnerability. Among households earning less
than $75,000 annually, 46% in 2019 met the U.S. Department of Housing and Urban Development definition for “housing
cost burdened” – paying 30% or more of their income in housing costs. One in five households earning less than
$75,000 a year in the Columbus MSA paid 50% or more of their income in rent or mortgages.2,3
In Central Ohio, low-wage workers in at-risk industry sectors live in high concentrations in many of the region’s rural
county seats, in parts of Appalachia where ecotourism is a dominant industry (e.g., Perry and Hocking Counties), and in
areas of Franklin County with higher concentrations of Black and brown residents (Figure 4). These communities will be
places to note. High-income workers have more or less rebounded employment since the start of the pandemic, but
middle-income workers (10% down since January 2020), and especially low-income workers (29% down since January
2020) are still struggling to recover (Figure 5).
Augmented unemployment benefits have provided a lifeline for struggling households, but enhanced supports are only
temporary and may fall short of meeting all household expenses. Discussed in greater detail in the Social Sector brief,
survey data from the U.S. Census Bureau suggests that one out of every three adults in Ohio are having a somewhat
or very difficult time keeping up with usual household expenses. These Ohioans are more likely to have experienced
loss of employment as a major factor contributing to their difficulty keeping up with bills. They are more reliant on state-
run assistance programs (e.g., Supplemental Nutritional Assistance Program), and they are more likely paying bills by
borrowing money from friends and family, using credit cards or loans, using savings, or selling assets.
New claims for unemployment surged in April 2020, tapering off throughout the rest of the year, but remaining at higher
rates than before the pandemic. More recently, Ohio’s unemployment claims system has become the target of significant
fraud. Initial claims more than tripled during the week ended February 6, 2021, to a level rivaling that during the worst
of the job loss in April 2020. The need to subject all claims to greater scrutiny increases system costs and could lead to
delays in the payment of legitimate claimants’ benefits, which would put extra strain on households’ budgets (Figure 6).
Central Ohio COVID19 Policy Briefs | Employment & Small Business 3
Figure 4. Home Locations of Workers Figure 5. Employment by Income
in Most At-Risk Industry Sectors Columbus MSA
Central Ohio Census Tracts, 2017 Jan 2020-Feb 2021, Daily
Figure 6. Unemployment Claims
Columbus MSA
Mar 2020-Mar 2021, Weekly
Central Ohio COVID19 Policy Briefs | Employment & Small Business 4
CHILDCARE ACCESS & AFFORDABILITY
Affordability of childcare poses a difficult challenge for families. The Massachusetts Institute of Technology’s Living
Wage Calculator estimates the unsubsidized annual cost of childcare at $9,714 per year per child.4 These costs are
sometimes subsidized for lower-income households, but childcare costs can be a substantial burden even for
households with moderate income.
A related problem is the benefits cliff: the fact that the childcare subsidy disappears at a certain household income level
that is often well below what is needed to afford the unsubsidized cost. This can cause a worker facing the loss of the
childcare benefit to make the economically rational decision to forgo a promotion or additional work hours. Childcare
access and affordability would remove a key barrier to entry into the labor force and help to stabilize household finances
for many Central Ohio families.
Childcare access is also challenging due to supply limitations—childcare centers are a business model that operates on
tight margins. The cost of operating a childcare facility and the ability of clients to pay, including their access to subsidies,
lead to different service levels, which manifests an inequity in quality of early learning experiences. Slots in accredited,
highly rated early childhood education centers, as rated by Ohio’s Step Up to Quality program, are both expensive and in
high demand. These inequities were already present before the pandemic, but the increased costs and revenue losses
created by COVID-19 are expected to intensify these disparities.
One year after the pandemic shutdowns began, 6% of unemployed workers nationally reported that their primary reason
for not working was caring for children who were not in school or daycare.5 Locally, the number of children authorized for
childcare subsidies has remained consistently lower than 2019 numbers since the pandemic shutdowns began in March
2020 (Figure 7). Neither the national nor local data tell a complete story about the reasons why families have some
workers focused on childcare responsibilities in lieu of work. For some families, there is a likely connection to childcare
centers scaling back enrollment or closing entirely, or families’ concerns about health or inability to find work.
Childcare centers’ financial stability relies on full enrollment, which has been prohibited during the pandemic. The initial
stay-at-home order closed all centers in the spring, which was a large blow to financial viability. Some workers who were
allowed to work from home provided their own childcare, and others relied on informal arrangements.
Estimates of the impact of these stresses on the number and employment of childcare centers in the Columbus MSA are
not yet available, but a survey of local centers in March 2020 by Action for Children paints a dire picture.6 One in six
childcare centers remained closed at that time, as a result of sustained low enrollment and increased costs for personal
protective equipment (PPE) and cleaning. At the time, 30% of still-open providers anticipated closing within three months
without immediate support, and half of providers reported closing within 6 months (Figure 8). The loss of even a fraction
of these at-risk providers, especially those rated as high-quality, will create limitations on the number of available slots
that will continue after the pandemic. Furthermore, 49% of respondents in the Action for Children survey had already or
planned to increase tuition. With the already high cost of childcare, this places additional strain on Central Ohio families,
especially those with lower incomes.
Figure 7. Subsidized Childcare Figure 8. Childcare Center Survey
Central Ohio Counties*, 2019-2020, Monthly Columbus MSA, March 2020
Central Ohio COVID19 Policy Briefs | Employment & Small Business 5
COLLAPSE IN CONSUMER
CONFIDENCE
Strong consumer confidence is essential for strong, sustained
growth in the economy. Consumer spending comprises
70% of gross domestic product (GDP), if consumers
lack confidence, they will not spend, and GDP growth will
be severely limited. The University of Michigan’s Consumer
Sentiment Index, which had been at 20-year highs before the
pandemic, fell to levels rivaling those immediately following the
2007-2009 recession as the pandemic took hold (Figure 9).
Although the reopening of the economy and the emergence of
therapies and vaccines has had a positive impact on the index, it
remains depressed.
The lack of confidence is evident in the personal savings
rate, which rose to historic highs, spiking to 33.7% during the
lockdown. By the fall of 2020, as consumer spending began
to slowly increase and overseas production and logistics
Figure 9. Consumer Sentiment
challenges subsided, the savings rate fell to the mid-teens, United States
a rate that still rivaled levels last seen in the early 1970s. In Jan 2010-Jan 2021, Monthly
January 2021, the rate again increased to 20.5% as economic
stimulus payments were hitting households’ bank accounts
(Figure 10). These savings represent amounts that households
are not devoting to consumption, which negatively impacts GDP
growth. Consumer confidence must improve before the savings
rate can return to pre-pandemic levels.
Discussed in more detail in the Economic and Community
Development brief, data obtained from Opportunity Insights’
Economic Tracker shows a clear divergence in consumer
spending by income.7 Lower income households are keeping up
with normal spending patterns, for the most part, as their budgets
tend to have fewer discretionary items that can be eliminated;
they are also less likely to be working from home, which makes it
difficult to eliminate some consumer spending needs. Middle- and
high-income households saw the greatest spending reductions,
suggesting that these earners are enjoying increased personal
savings, while making fewer contributions to GDP growth. Figure 10. Personal Savings Rate
United States
The economy and public health are linked in unprecedented Jan 2010-Jan 2021, Monthly
ways, and the course of the virus and vaccinations is critically
important to the return of confidence. The flow of positive news
about the declining virus positivity rate, the increasing number of
vaccinations, and the responsible reopening of sports and
entertainment venues to a limited number of patrons will have a
positive impact. However, there is an unknown number of
individuals who are hesitant to return to these venues. Perhaps
being vaccinated will reduce their concerns and thus making
vaccinations widely and easily available will help restore
confidence. Pent up demand for travel and tourism (discussed in
the Transportation brief) will also have positive effects on GDP
growth. The successful return of these economic engines will be
contingent on the publicizing of and adherence to public health
guidelines, which will reduce the positivity rate and keep the
economy reopening.
Central Ohio COVID19 Policy Briefs | Employment & Small Business
6
THREATS TO AN ALREADY WEAK SMALL
BUSINESS ENVIRONMENT
Central Ohio’s rate of self-employment, and concentration and growth of small businesses has been far below average for
years (Figure 11). Among the 100 largest MSAs in the U.S., Columbus in 2019 ranked 82nd in the percentage of workers
who are self-employed. Other statistics are available less regularly, but the rankings are stable. Columbus ranked 86th in
the share of all businesses that are small (fewer than 20 employees) in 2015 and 74th in the small business birthrate that
year.
Statistics on the loss of small businesses resulting from the economic stresses of the pandemic are not yet available, but
evidence suggests that a large number of small businesses are failing, or near failure. Discussed further in the Economic
and Community Development brief, these challenges are felt more acutely by businesses owned by people of color. A
national survey of small businesses suggests that “the share of firms that experienced financial challenges in the prior 12
months rose from 66% to 80% between 2019 and 2020.” 8 Furthermore, 90% of firms surveyed used some form of
emergency financial relief, predominately from the Paycheck Protection Program (PPP). Of the 64% of small businesses
that said they would apply for more financial support if available, 39% said their business would not survive unless
business returned to pre-pandemic levels, or more relief became available.
The new emergency relief package, however, offers much less aid to small businesses than previous rounds -- $50
billion of the $1.9 trillion plan, or only 2%. Of that total, $29 billion is targeted to aid hard-hit restaurants and bars, and
$1.25 billion is designated for live-event operators.8 Still, the economic stimulus provided to households will benefit
surviving businesses as confidence improves.
A March 2021 survey conducted by the U.S. Census Bureau of existing small businesses suggests that some Columbus
metro firms are still operating below capacity and anticipating a long, slow recovery. Although the extent is unknown,
by March 2021, some small businesses had already shuttered their operations, and would therefore be excluded from the
Census survey. Thirty percent of area small businesses are still operating within a 50% reduction of capacity, and an
estimated 40% of small businesses expect the “return to normal” will take at least 6 months. Still, some are anticipating a
ramp up of operations, by increasing staffing (40%), increasing marketing (30%), or making a capital expenditure (20%) in
the next 6 months. The size of firms and the nature of business matters, but this is unclear in these data.
Local businesses add unique elements to the community. Further, locally owned, locally serving businesses trap
spending that flows from chains to distant headquarters, so the spillover benefits of local businesses are greater. Civic
Economics has found that locally owned retailers trap an average of $0.48 of every sales dollar for at least one additional
round of spending, compared to $0.14 for the typical chain. The Columbus economy’s low concentration of small, local
businesses already has negative impacts on the economic impact of consumer spending, and the loss of these
businesses reduces the impact further.
Figure 11. Self-Employment
Columbus MSA & US
2010-2019, Annual
Central Ohio COVID19 Policy Briefs | Employment & Small Business 7
Local governments can provide aid to these businesses to the extent possible by aggressively promoting the benefits of
shopping locally and shopping small, and by reviewing their own bidding and bid selection processes. In some cases,
government bid preparation requirements are complex, lengthy, and may shut out small firms. Some governments in the
region explicitly award points to bidders within their own jurisdiction, but given the regional benefit of keeping spending
local, all governments within the region should consider establishing preferences for local bidders and ensure that bidding
requirements are as straightforward as possible.
The same preferences for local purchasing can be adopted by private employers, particularly large anchor institutions.
Trade associations and chambers of commerce could work with these companies to find local suppliers that could
effectively meet the needs for goods and services that are currently being met by suppliers based outside of the area.
The region’s civic technology community is connecting volunteers and local businesses. Can’t Stop Columbus has created
initiatives that help local businesses launch sites for e-commerce, and help residents find local restaurant options9 or other
small business retailers.10 There has been a significant shift to online shopping in recent years – a trend that has
accelerated during the pandemic. This trend threatens to leave behind businesses that do not have an online presence. In
addition to promoting buying locally, local governments should consider supplying resources and funding to assist small
businesses, perhaps via the civic technology volunteer community, to develop e-commerce options.
REFERENCES
1. SHARONE, O. (2021, MARCH 18). A CRISIS OF LONG-TERM UNEMPLOYMENT IS LOOMING IN THE U.S. HARVARD
BUSINESS REVIEW. https://hbr.org/2021/03/a-crisis-of-long-term-unemployment-is-looming-in-the-u-s
2. U.S. CENSUS BUREAU: 1-YEAR AMERICAN COMMUNITY SURVEY. (2019). HOUSEHOLD INCOME BY GROSS RENT
AS A PERCENTAGE OF HOUSEHOLD INCOME IN THE PAST 12 MONTHS (TABLE B25074) [DATA SET]. RETRIEVED
FROM https://data.census.gov
3. U.S. CENSUS BUREAU: 1-YEAR AMERICAN COMMUNITY SURVEY. (2019). HOUSEHOLD INCOME BY SELECTED
MONTHLY OWNER COSTS AS A PERCENTAGE OF HOUSEHOLD INCOME IN THE PAST 12 MONTHS (TABLE
B25075) [DATA SET]. RETRIEVED FROM https://data.census.gov
4. GLASMEIER, A. (2021). LIVING WAGE CALCULATOR [DATA TOOL]. MASSACHUSETTS INSITITUTE OF
TECHNOLOGY. RETRIEVED FROM https://livingwage.mit.edu/metros/18140
5. CENSUS HOUSEHOLD PULSE SURVEY (2021, MARCH 17 – MARCH 29). TABLE 3. EDUCATIONAL ATTAINMENT FOR
ADULTS NOT WORKING AT TIME OF SURVEY, BY MAIN REASON FOR NOT WORKING AND SOURCE USED TO
MEET SPENDING NEEDS [DATA SET]. RETRIEVED FROM
https://www.census.gov/data/tables/2021/demo/hhp/hhp27.html
6. ACTION FOR CHILDREN. (2021). OPEN DOES NOT MEAN OKAY: CHILD CARE AFTER A YEAR OF PANDEMIC.
COLUMBUS, OH: AUTHOR. RETREIVED FROM https://www.actionforchildren.org/open-does-not-mean-okay/
7. CHETTY, R., FRIEDMAN, J., HENDREN, N., AND STEPNER, M. (2021). ECONOMIC TRACKER [DATA TOOL].
OPPORTUNITY INSIGHTS. RETRIEVED FROM https://tracktherecovery.org/
8. FEDERAL RESERVE BANKS. (2021). SMALL BUSINESS CREDIT SURVEY: 2021 REPORT ON EMPLOYER FIRMS.
RETRIEVED FROM https://www.fedsmallbusiness.org/medialibrary/FedSmallBusiness/files/2021/2021-sbcs-employer-firms-
report
9. GANDEL, S. (2021, MARCH 18). BIDEN STIMULUS PLAN OFFERS LESS HELP FOR SMALL BUSINESSES. CBS NEWS.
https://www.cbsnews.com/news/american-rescue-plan-small-business-stimulus/?intcid=CNM-00-10abd1h
10. SUPPORT COLUMBUS EATS. RETRIEVED FROM https://www.supportcolumbuseats.com/
11. SHOP SMALL COLLECTIVE. RETRIEVED FROM http://www.shopsmall.co/
Funders
Columbus City Council
The Columbus Foundation
The Robert Wood Johnson Foundation
Central Ohio COVID19 Policy Briefs | Employment & Small Business 8
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